Chicago pension bill property tax language removed

Published: Monday, April 7, 2014 11:01 p.m. CDT

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SPRINGFIELD – After an outcry from Illinois' Democratic governor and a host of lawmakers on both sides of the aisle waging re-election battles, language imposing a Chicago property tax hike has been removed from legislation overhauling two city pension funds.

House Speaker Michael J. Madigan quietly filed an amendment to the legislation Monday evening, hours after the House adjourned for the day. The amended plan would squarely place all revenue decisions – among them, the burden of levying an unpopular tax increase – on the city council.

Mayor Rahm Emanuel announced last week that he had an agreement with two city unions covering 57,000 workers and retirees to cut a $20 billion deficit in the municipal workers' and labor workers' pension funds over 40 years. He said it would happen in part through a five-year, $750 million increase in property taxes.

The state General Assembly must approve the changes. Some state lawmakers had raised concerns that they would unfairly shoulder the burden of raising taxes if they approved the original legislation.

"The amendment is designed to address some of the concerns the legislator voiced when the proposal was first unveiled," Madigan's spokesman, Steve Brown, said Tuesday evening. "We're continuing to work the roll call to try to pass the bill."

Emanuel's office said Monday the legislation "can move forward" now that concerns from labor leaders and lawmakers have been addressed.

"I reject the false choice between allowing the pension funds to go belly up, delivering thousands of pink slips to city workers, or enacting a massive property tax increase. This plan will secure these pension funds while ensuring the taxpayers don't have to shoulder the burden alone," the mayor said in a statement.

In addition to lawmakers' concerns, the move comes the same day as Gov. Pat Quinn told reporters the property tax was a "lousy" way to solve the city's pension crisis.

"We're not going to go that way," he told reporters, adding that Chicago officials "need to be a whole lot more creative."

Quinn, who is making a re-election bid against Winnetka businessman Bruce Rauner, made property-tax relief a cornerstone of his state budget plan, unveiled late last month. The governor also wants to make permanent what had been planned to be a temporary increase in the state income tax.

The amended plan also softens the blow of the overhaul on retirees earning the least. According to the new proposal, retirees earning less than $22,000 annually would be guaranteed a cost of living increase of 1 percent of their original annuity, regardless of inflation.

The Personnel and Pensions Committee, controlled by Democrats, last Wednesday voted 6-4 to send the proposal that would include hiking property taxes to the House floor.

The changes likely could place the legislation on a fast track, which Moody's Investor Services said Monday will improve the city's financial outlook, but not will permanently solve its problems.